Daniela Castro Sebastien De Knoop Nicolas Murcia Cameron Trenfield Lynn Van den Maegdenbergh Capital flows  in the Single ...
Introduction “ As the European Union is growing, several objectives must be considered within the single market to reach a...
Timeline 1957 Treaty of Rome Article 67: Full liberalization  of “Capital Movements” 1988 Single European Act Directives: ...
Achieving the Free Circulation of Capital <ul><li>Full  liberalisation  of capital  movements   between  Member States (Ju...
Establishing a European Financial Area <ul><li>Progressive liberalisation of capital movements: </li></ul><ul><ul><li>Capi...
The Legal Aspects of Intra-EU Investment <ul><li>Capital movements: </li></ul><ul><li>« Acquisition of domestic securities...
Financial Assistance for Balances of Payments <ul><li>The outstanding amount of loans to be granted to Member States under...
Impact on Capital Markets <ul><li>Harmonisation of capital markets increases transparency and avoid arbitrage disputes. </...
Banks and the Free Movement of Capital <ul><ul><li>Cross-border payments </li></ul></ul><ul><ul><li>Cross-border credit tr...
Cross-border Payments <ul><ul><li>Cross-border credit transfers </li></ul></ul><ul><ul><li>Cross-border electronic payment...
Cross-border Credit Transfers <ul><li>Directive 97/5/EC   (February 14 th , 1997) </li></ul><ul><ul><ul><li>Strengthened b...
Transfer of Funds <ul><li>Regulation (EC) No 1781/2006   (November 15 th , 2006) </li></ul><ul><ul><li>To establish the tr...
Businesses and the free movement of Capital <ul><ul><li>“ European Company” </li></ul></ul><ul><ul><li>Annual Accounts </l...
The Formation of a  “European Company” For the completion of an internal market,  “ companies […] should be able to plan a...
The Formation of a “European Company” <ul><li>Four ways of forming a European Company: </li></ul><ul><ul><li>Merger </li><...
Allianz (Ger) First European Company <ul><li>Largest financial services provider: </li></ul><ul><ul><li>75% total revenues...
New organizational structure
Annual Accounts <ul><li>Fourth Council Directive 78/660/EEC   (Jul.25 th  ‘78) </li></ul><ul><ul><li>To coordinate Member ...
Payment and Securities  Settlement Systems <ul><li>Directive 98/26/EC   (June 11 th , 1998) </li></ul><ul><ul><li>To reduc...
Investor Compensation Schemes <ul><li>European Parliament and Council Directive 97/9/EC   (March 3 rd , 1997) </li></ul><u...
Late Payments <ul><li>Directive 2000/35/EC   (June 29 th , 2000) </li></ul><ul><li>To encourage public authorities and com...
Consumers and the free movement of Capital <ul><li>Actions of Injunction </li></ul><ul><li>Consumer Credit </li></ul><ul><...
Action of Injunction <ul><li>Directive 98/27/EC  ( May 19th 1998)   </li></ul><ul><ul><li>To approximate the laws, regulat...
<ul><li>Council Directive 87/102/EEC   </li></ul><ul><li>( December 22nd 1986)   </li></ul><ul><ul><li>European legislatio...
Benefits to Consumers <ul><li>All EU consumers will have the right to the same information in their country or other EU Me...
GDP Facts European consumers owe more than US$1.18 trillion or nearly 1/10th of EU gross domestic product and this market ...
<ul><li>Council Directive 93/13/EC   </li></ul><ul><li>The existing Consumer Credit Directive is based on minimum harmoniz...
<ul><li>Negotiations within the Council focused on : </li></ul><ul><li>Standard information for advertising </li></ul><ul>...
Purchasing Property in another Member State The free movement of capital includes the rights of citizens and businesses to...
World Property Investment Hot Spot
Fiscal Aspects of the Free Movement of Capital Economic Stakeholders Private Individuals
Indirect Taxes on the Raising of Capital <ul><ul><li>Directive 69/335/EEC   (Jul. 17 TH  1969)   </li></ul></ul><ul><ul><l...
<ul><ul><li>Directive  2006/98/EC   (Nov. 20 th  2006) </li></ul></ul><ul><ul><li>Due to accession of Bulgaria and Romania...
Taxation: Parent companies & Subsidiaries The distribution of profit coming from and to a company whose main centre of man...
Common System of Taxation Directive 90/434EEC   (July 23 rd  1992) Set common regulations for taxation on mergers, divisio...
Taxation of Savings Income <ul><li>Council Directive 2003/48/EC   (23 June 2003) </li></ul><ul><ul><li>Enables interest on...
Tackling Tax Obstacles to the cross-border provision of occupational pensions <ul><li>Commission’s Objectives : </li></ul>...
<ul><li>The main institution is the European Anti-Fraud Office (OLAF) </li></ul><ul><li>Objectives:  </li></ul><ul><ul><li...
Money Laundering <ul><ul><li>Any illegal activities include : </li></ul></ul><ul><ul><li>Converting property acquired in a...
Obligations of Businesses <ul><ul><li>Businesses are responsible vis-à-vis there customers </li></ul></ul><ul><ul><ul><li>...
FIU <ul><ul><li>Financial Intelligence Unit   </li></ul></ul><ul><ul><ul><li>Established in every Member State </li></ul><...
Customs Declaration <ul><ul><li>Anyone carrying more than EUR 10,000 must declare it at the borders of the Community </li>...
Corporate Malpractice <ul><li>Enhance transparency </li></ul><ul><ul><li>Both within company and in transactions between c...
Financial Crime <ul><ul><li>Commission puts big emphasis on combating organized financial crime </li></ul></ul><ul><ul><ul...
Financing of Terrorism <ul><li>Combat financing of terrorism </li></ul><ul><ul><li>Facilitation of the freezing of suspect...
Fraud in Numbers <ul><ul><li>Number of frauds decrease by 12% </li></ul></ul><ul><ul><li>Value of fraud increase from 328 ...
External Capital
Foreign Direct Investment
World Destinations
Intra and Extra Flows
Conclusion The free movement of capital, like the three other fundamental freedoms of the EU, has enabled its Member State...
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European Union Single Market Capital Flows

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Capital Flows and regulations in the European Union

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European Union Single Market Capital Flows

  1. 1. Daniela Castro Sebastien De Knoop Nicolas Murcia Cameron Trenfield Lynn Van den Maegdenbergh Capital flows in the Single Market
  2. 2. Introduction “ As the European Union is growing, several objectives must be considered within the single market to reach a true political and economic community of 27 Member States as t he free movement of capital is one of the fundamental principles of the Union”
  3. 3. Timeline 1957 Treaty of Rome Article 67: Full liberalization of “Capital Movements” 1988 Single European Act Directives: Effective integration of “Capital Movements” 2008-2010 Lisbon Program Objectives: Effective integration of “Financial Services” Free Movement of Capital MANDATORY 1990 1997-1998 Madrid European Council Capital Markets: Regulatory framework 01/1999 €
  4. 4. Achieving the Free Circulation of Capital <ul><li>Full liberalisation of capital movements between Member States (July, 1990) </li></ul><ul><li>Abolish restrictions on « Capital movements »  </li></ul><ul><li>Safeguard Clause </li></ul>
  5. 5. Establishing a European Financial Area <ul><li>Progressive liberalisation of capital movements: </li></ul><ul><ul><li>Capital operations in financial market securities </li></ul></ul><ul><ul><li>Operations involving financial credits </li></ul></ul>
  6. 6. The Legal Aspects of Intra-EU Investment <ul><li>Capital movements: </li></ul><ul><li>« Acquisition of domestic securities » : Right to acquire stakes and to exercise the resulting voting rights under the same conditions as the domestic government. </li></ul><ul><li>Exceptions are based on economic, public security or public health considerations: </li></ul><ul><ul><li>Microsoft (USA) </li></ul></ul><ul><li>Privatization of a public company: </li></ul><ul><ul><li>France Telecom (France) </li></ul></ul>
  7. 7. Financial Assistance for Balances of Payments <ul><li>The outstanding amount of loans to be granted to Member States under this facility is limited to </li></ul><ul><li>€ 12 000 million </li></ul><ul><li>The Commission is empowered, on behalf of the European Community, to contract loans on the capital markets or with financial institutions </li></ul><ul><li>Support made available by the European Central Bank (ECB) under the very short-term financing facility program </li></ul>
  8. 8. Impact on Capital Markets <ul><li>Harmonisation of capital markets increases transparency and avoid arbitrage disputes. </li></ul><ul><ul><li>Business conventions </li></ul></ul><ul><ul><li>Bonds </li></ul></ul><ul><li>Equity markets: </li></ul><ul><li>Non Par Value shares (NPV) (January 4th, 1999 ) </li></ul><ul><li>Ratings: </li></ul><ul><li>Sovereign debt </li></ul><ul><li>Corporate debt </li></ul>
  9. 9. Banks and the Free Movement of Capital <ul><ul><li>Cross-border payments </li></ul></ul><ul><ul><li>Cross-border credit transfers </li></ul></ul><ul><ul><li>Transfers of funds </li></ul></ul>
  10. 10. Cross-border Payments <ul><ul><li>Cross-border credit transfers </li></ul></ul><ul><ul><li>Cross-border electronic payment transactions </li></ul></ul><ul><ul><li>Cross-border checks </li></ul></ul><ul><li>Regulation (EC) No 2560/2001 (Dec. 31 st , 2001) </li></ul><ul><ul><li>To ensure that charges for those payments are the same as those for payments in euros within a Member State </li></ul></ul><ul><li>COM (2005) 603 (December 1 st , 2005) </li></ul><ul><ul><li>To put forward a common legal framework for retail payment services in the internal market </li></ul></ul>
  11. 11. Cross-border Credit Transfers <ul><li>Directive 97/5/EC (February 14 th , 1997) </li></ul><ul><ul><ul><li>Strengthened by Regulation 2560/2001 (December 28 th , 2001) </li></ul></ul></ul><ul><ul><li>To ensure that credit transfers throughout the EU are performed rapidly and inexpensively </li></ul></ul>
  12. 12. Transfer of Funds <ul><li>Regulation (EC) No 1781/2006 (November 15 th , 2006) </li></ul><ul><ul><li>To establish the traceability of transfer of funds which are applicable to all payment service providers </li></ul></ul><ul><li>Objective : To further combat terrorist financing </li></ul>
  13. 13. Businesses and the free movement of Capital <ul><ul><li>“ European Company” </li></ul></ul><ul><ul><li>Annual Accounts </li></ul></ul><ul><ul><li>Payment and securities systems </li></ul></ul><ul><ul><li>Investor Compensation Schemes </li></ul></ul><ul><ul><li>Late Payments </li></ul></ul>
  14. 14. The Formation of a “European Company” For the completion of an internal market, “ companies […] should be able to plan and carry out the re-organisation of their business on a Community scale. […] Such re-organisation presupposes that existing companies from different Member States are given the option of combining their potential by means of mergers.” (Council Regulation (EC) No 2157/2001 of 8 October 2001)
  15. 15. The Formation of a “European Company” <ul><li>Four ways of forming a European Company: </li></ul><ul><ul><li>Merger </li></ul></ul><ul><ul><li>Formation of a holding company </li></ul></ul><ul><ul><li>Formation of a joint subsidiary </li></ul></ul><ul><ul><li>Conversion of a public limited company previously formed under national law </li></ul></ul><ul><li>Minimum Capital: € 120 000 </li></ul><ul><li>Registered Office: where it has its true centre of operations </li></ul><ul><li>Statutes: </li></ul><ul><ul><li>Administrative board (single-tier system) </li></ul></ul><ul><ul><li>Management board + supervisory board (two-tier system) </li></ul></ul><ul><li>Taxation: treated as a multinational </li></ul>
  16. 16. Allianz (Ger) First European Company <ul><li>Largest financial services provider: </li></ul><ul><ul><li>75% total revenues generated in Europe </li></ul></ul><ul><ul><li>€ 5.5 billion in operating profit (2005) </li></ul></ul><ul><ul><li>Represented in 29 European Countries </li></ul></ul><ul><li>Became a SE on October 13 th , 2006 </li></ul><ul><ul><li>Supervisory Board with 6 members representing staff from all European Countries </li></ul></ul><ul><ul><li>Simplified operating structures </li></ul></ul><ul><ul><li>€ 2.87 bn (9 first months of 2007) compared to € 2.07 bn (2006) </li></ul></ul>
  17. 17. New organizational structure
  18. 18. Annual Accounts <ul><li>Fourth Council Directive 78/660/EEC (Jul.25 th ‘78) </li></ul><ul><ul><li>To coordinate Member States’ presentation and content of annual accounts and annual reports </li></ul></ul><ul><ul><li>Directive 2001/65/EC (Sept. 27 th , 2001) </li></ul></ul><ul><ul><ul><li>Adopting the method of “fair value accounting” </li></ul></ul></ul><ul><ul><li>Council Directive 2006/43/EC (May.17 th ,’06) </li></ul></ul><ul><ul><ul><li>Harmonize auditing of annual accounts </li></ul></ul></ul>
  19. 19. Payment and Securities Settlement Systems <ul><li>Directive 98/26/EC (June 11 th , 1998) </li></ul><ul><ul><li>To reduce the risk associated with participation in payment and securities settlement systems (risk linked to insolvency of a participant). </li></ul></ul><ul><li>Transfer orders and netting must be legally enforceable </li></ul><ul><li>Transfer orders may not be revoked once they have been entered into the system </li></ul><ul><li>The insolvency law applicable is the law of the Member State whose system is involved </li></ul>
  20. 20. Investor Compensation Schemes <ul><li>European Parliament and Council Directive 97/9/EC (March 3 rd , 1997) </li></ul><ul><ul><li>To protect investors following the failure of an investment firm. </li></ul></ul><ul><li>Min. level of compensation/investor : € 20 000 </li></ul><ul><li>Investors must submit their claims within maximum 3 months of the establishment of the eligibility </li></ul>
  21. 21. Late Payments <ul><li>Directive 2000/35/EC (June 29 th , 2000) </li></ul><ul><li>To encourage public authorities and companies to comply with payment deadlines in commercial transactions </li></ul><ul><ul><li>Payment due within 30 days after the receipt of the invoice or the receipt of the goods/services </li></ul></ul><ul><ul><li>Interest on late payment </li></ul></ul><ul><ul><li>= interest rate applied by the ECB to its main refinancing + 7% </li></ul></ul>
  22. 22. Consumers and the free movement of Capital <ul><li>Actions of Injunction </li></ul><ul><li>Consumer Credit </li></ul><ul><li>Credit Agreements </li></ul>
  23. 23. Action of Injunction <ul><li>Directive 98/27/EC ( May 19th 1998) </li></ul><ul><ul><li>To approximate the laws, regulations and administrative provisions of the Member States in order to protect the collective interests of consumers. </li></ul></ul><ul><li>Entities : </li></ul><ul><li>Bodies or organisations which have a legitimate interest in ensuring that the collective interests of consumers are protected </li></ul><ul><li>Independent public bodies </li></ul><ul><li>Bodies whose mission is to protect these interests in compliance with criteria laid down in national law. </li></ul>
  24. 24. <ul><li>Council Directive 87/102/EEC </li></ul><ul><li>( December 22nd 1986) </li></ul><ul><ul><li>European legislation harmonizes the general conditions relating to consumer credit </li></ul></ul><ul><li>The EU market in consumer credit is still national </li></ul><ul><li>The EP Internal Market and Consumer Protection Committee plan to stimulate the European market while still protecting consumers. </li></ul>Consumer Credit
  25. 25. Benefits to Consumers <ul><li>All EU consumers will have the right to the same information in their country or other EU Member State </li></ul><ul><li>It will be easier to calculate the total cost of a loan </li></ul><ul><li>It will be standardized EU-wide and will be used as a basis for calculating the annual percentage rate of charge (APR) </li></ul><ul><li>Protect consumers against taking on too much debt. It will be easier to pay off loans early </li></ul><ul><li>A right of cancellation within 14 days will apply EU-wide . </li></ul>
  26. 26. GDP Facts European consumers owe more than US$1.18 trillion or nearly 1/10th of EU gross domestic product and this market is growing at 8% a year. Britain and Ireland are among countries where borrowing is the most popular. On average, Lithuanians and Slovakians owe less than US$148 while cash-rich spenders in Britain and Ireland owe more than US$4,440.
  27. 27. <ul><li>Council Directive 93/13/EC </li></ul><ul><li>The existing Consumer Credit Directive is based on minimum harmonization . </li></ul><ul><li>The future legislation on credit agreements for consumers will harmonize the existing legislation </li></ul><ul><ul><li>ensuring the same level of consumer protection </li></ul></ul><ul><ul><li>facilitating access to transnational credit at European level. </li></ul></ul>Credit Agreements
  28. 28. <ul><li>Negotiations within the Council focused on : </li></ul><ul><li>Standard information for advertising </li></ul><ul><li>Pre-contractual information and contractual information to be included in credit agreements </li></ul><ul><li>Right of withdrawal </li></ul><ul><li>Early repayment of the credit and the creditor’s right to compensation </li></ul><ul><li>The calculation of the annual percentage rate of charge (APR). </li></ul>Credit Agreement
  29. 29. Purchasing Property in another Member State The free movement of capital includes the rights of citizens and businesses to purchase shares in companies established in a different Member State and to purchase properties * Exceptions with new member states
  30. 30. World Property Investment Hot Spot
  31. 31. Fiscal Aspects of the Free Movement of Capital Economic Stakeholders Private Individuals
  32. 32. Indirect Taxes on the Raising of Capital <ul><ul><li>Directive 69/335/EEC (Jul. 17 TH 1969) </li></ul></ul><ul><ul><li>Abolishes stamp duty on securities. Transactions subject to capital duty are only taxable in the Member State in which a company’s main centre of management is located. Attempts to reduce double-taxation, capital duties and further the common market. </li></ul></ul><ul><ul><li>Directive 74/553/EEC (Nov. 7 th 1974) </li></ul></ul><ul><ul><li>The amount of Capital Duty charged is based on the value of the shares belonging to each member. </li></ul></ul>
  33. 33. <ul><ul><li>Directive 2006/98/EC (Nov. 20 th 2006) </li></ul></ul><ul><ul><li>Due to accession of Bulgaria and Romania. </li></ul></ul><ul><ul><li>Complete Harmonization of indirect taxation. </li></ul></ul>Indirect Taxes on the Raising of Capital
  34. 34. Taxation: Parent companies & Subsidiaries The distribution of profit coming from and to a company whose main centre of management is located in a different Member State Council Directive 90/435/EEC (23 July 1990) With amended Directives 2003/123/EC and 2006/98/EC The Member State in which the parent company resides either cannot tax distributed profits or can offer corporate tax deductions to profits made by the parent company’s subsidiaries (located outside of the Member State but within the EU)
  35. 35. Common System of Taxation Directive 90/434EEC (July 23 rd 1992) Set common regulations for taxation on mergers, divisions and contributions of assets Capital Gains are not taxable at the time of a transaction When a merger entails the transfer of an asset from one member state to another, the former must renounce all taxing rights Member States do not apply the provisions of the Directive when taxing a direct or indirect shareholder of certain corporate taxpayers.
  36. 36. Taxation of Savings Income <ul><li>Council Directive 2003/48/EC (23 June 2003) </li></ul><ul><ul><li>Enables interest on savings received in one Member State by individuals who are resident for tax purposes in another Member State to be made subject to effective taxation in accordance with the laws of the latter Member State </li></ul></ul><ul><ul><li>Cooperation and exchange of banking information between member states is fostered </li></ul></ul>
  37. 37. Tackling Tax Obstacles to the cross-border provision of occupational pensions <ul><li>Commission’s Objectives : </li></ul><ul><li>Seek a coordinated approach adapted to the diversity of Member States' rules rather than attempting to achieve harmonisation; </li></ul><ul><li>Call for the elimination of unduly restrictive or discriminatory tax rules; </li></ul><ul><li>Present measures to safeguard Member States' tax revenues. </li></ul><ul><li>The EU is looking to abolish cross-border provision obstacles using the same cooperation tactics they use for interest tax savings. </li></ul>
  38. 38. <ul><li>The main institution is the European Anti-Fraud Office (OLAF) </li></ul><ul><li>Objectives: </li></ul><ul><ul><li>Protect financial interests of European Union </li></ul></ul><ul><ul><li>Fight fraud, corruption, and other irregularities </li></ul></ul><ul><li>Methods </li></ul><ul><ul><li>Independent internal and external investigations </li></ul></ul><ul><ul><li>Organizes cooperation between corresponding associations of member states </li></ul></ul>Fight against Fraud
  39. 39. Money Laundering <ul><ul><li>Any illegal activities include : </li></ul></ul><ul><ul><li>Converting property acquired in a criminal manner </li></ul></ul><ul><ul><li>Helping someone who is laundering money </li></ul></ul><ul><ul><li>Acquiring property that was obtained illegally </li></ul></ul><ul><ul><li>Disguising any information concerning financial property </li></ul></ul>
  40. 40. Obligations of Businesses <ul><ul><li>Businesses are responsible vis-à-vis there customers </li></ul></ul><ul><ul><ul><li>As soon as they establish a business relation </li></ul></ul></ul><ul><ul><ul><li>When there are transactions of EUR-15,000 </li></ul></ul></ul><ul><ul><ul><li>In any suspicion of illegal activity </li></ul></ul></ul>
  41. 41. FIU <ul><ul><li>Financial Intelligence Unit </li></ul></ul><ul><ul><ul><li>Established in every Member State </li></ul></ul></ul><ul><ul><ul><li>Whenever suspicion arises, must notify the FIU </li></ul></ul></ul><ul><ul><ul><li>Commission facilitates interaction between FIU’s </li></ul></ul></ul>
  42. 42. Customs Declaration <ul><ul><li>Anyone carrying more than EUR 10,000 must declare it at the borders of the Community </li></ul></ul><ul><ul><li>Information can be used by Member State to look into fraud </li></ul></ul><ul><ul><li>May share information with other member states </li></ul></ul><ul><ul><li>Professional Secrecy remains intact. </li></ul></ul>
  43. 43. Corporate Malpractice <ul><li>Enhance transparency </li></ul><ul><ul><li>Both within company and in transactions between companies </li></ul></ul><ul><ul><li>Clarify responsibilities of board members </li></ul></ul><ul><ul><li>Oblige all listed companies to make a public annual statement </li></ul></ul>
  44. 44. Financial Crime <ul><ul><li>Commission puts big emphasis on combating organized financial crime </li></ul></ul><ul><ul><ul><li>If financial crime decreases, organized crime decreases too </li></ul></ul></ul>
  45. 45. Financing of Terrorism <ul><li>Combat financing of terrorism </li></ul><ul><ul><li>Facilitation of the freezing of suspect bank accounts </li></ul></ul><ul><ul><li>Communication across Member States regarding suspect flows of capital </li></ul></ul>
  46. 46. Fraud in Numbers <ul><ul><li>Number of frauds decrease by 12% </li></ul></ul><ul><ul><li>Value of fraud increase from 328 to 353 million Euros (7%) </li></ul></ul><ul><ul><li>Using anti-dumping duties, Chinese bicycles importers evaded million of Euros </li></ul></ul><ul><ul><li>7.3 Billion Euros since OLAF creation in 1999 </li></ul></ul>
  47. 47. External Capital
  48. 48. Foreign Direct Investment
  49. 49. World Destinations
  50. 50. Intra and Extra Flows
  51. 51. Conclusion The free movement of capital, like the three other fundamental freedoms of the EU, has enabled its Member States to achieve new levels of prosperity. The fluidity of capital has facilitated transactions amongst any individual or entity in the EU. The increased amount of cooperation forges stronger relationships amongst Member States and provides a platform to further improve agreements.
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